4 Stocks That Could Reclaim July Highs

Includes: HIG, RVBD, TEX, WFT
by: Stone Fox Capital

After a summer of watching the markets tank-- especially in the global growth sectors, the economic news and earnings reports clearly haven't backed up the market dive. This apparent fear of a 2008 repeat without the matching reality got us to thinking about what would happen if stocks reclaimed prices prior to the summer swoon. Nothing aggressive like 52 week highs or even all time highs, just a simple recent stock price that the numbers suggest shouldn't have been thrown away.

Considering numerous high fliers and leading dividend stocks were able to maintain prices at 52 week highs, why couldn't others recapture those recent highs? In some cases, levels not even close to 52 week highs.

Numerous technology companies have handily beat estimates, insurance stocks have had limited damage to long term earnings potential, while seeing book values increased, and plenty of industrial and equipment builders have maintained surging growth from developing markets.

Why should any of these stocks trade down at all? Instead though, the majority have been slammed in many cases more than 50%.

With U.S. economic news helping push off any double dip fears and China still growing over 9%, let's review a selection of stocks in different sectors that can possibly reclaim July levels in a short time. This is far from a comprehensive list, but a good sample of where the market has overreacted by fearing the worst.

Remember that the July high doesn't even come close to the 52 week highs from February or April. In most cases, July isn't all that aggressive.

Riverbed Technology (NASDAQ:RVBD) - this networking equipment company might be the best example of the theory of reclaiming July highs. After reporting Q2 numbers in July, RVBD gave guidance that utterly disappointed the markets. Being a high flier, the stock plummeted from $42 to $20 in just a month. Now after the close last Wednesday, RVBD reported Q3 numbers that handily beat the original analyst estimates 90 days ago. Why all the fear and trepidation? Not to mention the 50% haircut.

Evidently some fears regarding Europe Q2 sales forced the company to be conservative on the original Q3 guidance. But how did analysts over the last couple of weeks miss that not only did RVBD beat estimates, but it crushed them? See the infamous Q3 cut by Baird just last week. Yikes! The chart has a major gap from $34 to $40 that probably will be filled as well as our theory on July highs.

Terex (NYSE:TEX) - this construction equipment and crane company highlights the epitome of fear. Not only has the stock dropped from a high of $30 in July to a low below $10 recently, but the stock actually hit the high $30s in April.

United Rentals (NYSE:URI) reported on Tuesday earnings that crushed estimates and suggested it would purchase more equipment. TEX should be a huge beneficiary of this demand. Considering both TEX and competitor Manitowoc (NYSE:MTW) had presentations in September that claimed demand remained strong in Q3, this massive drop still remains puzzling.

Hartford Financial (NYSE:HIG) - this insurance company has been dogged by catastrophe losses and low interest rates in 2011. Regardless, the company has remained very profitable this year and book value continues to grow. With the stock trading below half of book value, the sell off from $27 in early July just doesn't add up. With little long term impact from the summer swoon, this stock could bounce quickly from $19.

Weatherford International (NYSE:WFT) - this global oil service company has already jumped significantly from October lows, but still remains down from roughly $23 in July. Demand for oil services just isn't going to abate with Brent trading above $110. Sure, customers won't make as much as when Brent was higher in early July, but the profit equation is still enormously positive now.

Interestingly, analyst estimates for 2012 are actually higher at $1.57 now than 90 days ago, when estimates were $1.51. Even if some analysts are behind on updating numbers, the story at WFT ultimately hasn't changed with oil dropping from super high levels. Oh, and the 52 week high is $26.25, so just hitting July highs is only a minor achievement.

These four stocks are just a few examples of stocks decimated during the summer swoon, even though the companies had limited to no actual impact. Maybe a Lehman type event will still occur in Europe to validate these stock declines. Absent that, all these stocks appear extremely attractive

Disclosure: I am long TEX, HIG, WFT, RVBD.

Additional disclosure: Please consult your financial advisor before making any investment decisions.